“De-globalization” Already Happened And It Didn’t Matter

Key Points

  • In 2020, politics and the pandemic have led to a lot of speculation that they could bring about an end to the rise of globalization—yet that began over a decade ago.

  • Three major causes of the stall in global trade growth over the past 12 years are: the drop in oil trade, the rise in the value of the U.S. dollar, and products crossing borders fewer times during the manufacturing process.

  • For investors, the stall in global trade since 2008 hasn’t necessarily lead to a stall in profits for multinational companies that make up the major stock market indexes or a decline in the international portion of those profits.

The “end of globalization” is a phrase that has come up a lot lately. Stories written about deglobalization have soared this year with the pandemic. But they began four years ago, right after the last U.S. Presidential election, as you can see in the chart of major news stories below. Although some authors attribute the potential end of world trade growth to President Trump’s trade policy and the supply chain impacts of the COVID-19 pandemic, the data shows that neither of these caused the peak in global trade momentum.

Hot topic

The decline in global trade momentum started back in 2008, as you can see in the chart below, years before articles were being written on the subject. At that time, Obama was elected President and Avian Influenza was declared a pandemic by the World Health Organization. But, the stall in global trade had nothing to do with either of those things either.

World trade has been stalled since 2008